Gerry Devine - Practice Manager Adviser

Understanding changes to the NHS Pension Fund

Changes are being introduced to the NHS Pension fund next week, and whilst Practice Managers are not licensed financial advisors (though your job description seems to include ‘being an expert in everything’), you are likely to face questions about the changes from staff who are seeking to understand what it means to them.

Around 75% of existing NHS employees and all new starts (through auto-enrolment) will join the new scheme. To help you get to grips with these changes, we’ve created a lay person’s guide to the NHS Fund as of April 1st 2015.

Who is affected?

Existing members of the fund will not have to join the new scheme if they were within 10 years of their normal retirement age on 1st April 2012. 

Existing members who were within 10-13.5 years of their normal pension age on 1st April 2012 will have their date of joining delayed to a date after 1st April. The actual date is dependent on how close to their normal pension age they were on 1st April 2012.

Members who were 13.5 years away from their normal pension age on 1st April 2012 will join the new scheme on 1st April this year. 

What happens to benefits built up in the old scheme?

When existing members transfer to the new scheme the provisions of that scheme will affect future service only.

Benefits already built up in the 1995/2008 schemes will be retained and calculated by reference to final pay at or near their retirement - provided the member has not had a break in membership of five or more years. 

Such members will still need to retire from NHS employment in order to access their 1995/2008 section benefits.

How do the schemes compare?

The following table is intended to provide an ‘at a glance comparison’ between the upcoming changes and the existing 1995 and 2008 sections.

 

1995 Section

2008 Section

2015 Section

Scheme Type

Final Salary

Final Salary

CARE

Pension

1/80 of Final years pensionable Pay for each year of Service

1/60 of Final years pensionable Pay for each year of Service

1/54th of earnings per year updated by CP1 plus 1.5% to retirement


Retirement Lump Sum

3 times pension and possible to exchange more pension for cash at a rate of 12:1 up to a maximum limit

Possible to exchange pension for cash at rate of 12:1 up to a maximum limit

Possible to exchange pension for cash at the rate of 12:1 up to a maximum limit

Normal Retirement Age

60

65

State Pension Age

Earliest Retirement Age

50 for existing members who were an active member at 5th April 2006. Otherwise 55.

55

55

Death In Service benefit

2 times actual Pensionable Pay

2 times actual Pensionable Pay

2 times actual Pensionable Pay

Flexible Retirement Option

No – must leave scheme to draw pension

Yes- Can reduce, draw pension and earn further pension

Yes- Can reduce, draw pension and earn further pension

Added Years option

Yes

No

No

 

For a copy of the readiness guide for employers please click here and to access all details about the new and existing sections of the pension fund please click here.

Updates to the Contracts of Employment and Offer of Employment Letter reflecting the changes to the NHS Pension will be available in the FPM Policies and Procedures library when the changes come into effect 1st April 2015.

© First Practice Management, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.


Comments

Stefano 04/08/2015

Thanks David. Your own experience adds a rellay good insight to the many dilemmas people face with the ageing of our families. Pensions are a very important aspect of this and are one way of providing for yourself and those you care for. But you still need the chrystal ball to guess the answers to many of the issues, unfortunately, crystal balls are no more reliable than the Government.


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